Feds say City Colleges debit card program complies with law

A U.S. Department of Education review of a voluntary debit card program at the City Colleges of Chicago has found that the program meets all of the requirements under federal law.

The department began the review two months ago and, in a four-sentence letter to the district last week, said simply that the program is “in compliance” with federal law.

The debit cards are one of several options City Colleges students have for receiving their student loan refunds – that is, the financial aid money that remains after tuition costs are covered. Students can use that money on expenses such as rent and transportation.

The City Colleges rolled out the debit card program in the fall at Kennedy-King College as an easy alternative to waiting for paper checks. Initially, many students were under the impression they had to sign up for the debit cards to get their loan refunds.

The cards, which are managed by JPMorgan Chase and act like a bank debit card, carry fees of $2 for making an ATM withdrawal and $10 for visiting a teller; the first withdrawal is free.

In a written statement, Education Department spokeswoman Stephanie Babyak said that the agency took a number of factors into consideration, including that students can still get their loan refunds direct-deposited or issued as a paper check.

“Acknowledging that there were misunderstandings at the start-up of the program, CCC and Chase have been out to all schools to explain the program,” Babyak said in the statement.

A 2005 policy letter from the Department of Education said, “The student should not incur any fees” when using pre-loaded debit cards.

This week’s decision does not address another part of that policy letter, which states, “It would appear to be reasonable for an issuing bank to allow ATM withdrawals from it to be free, or to provide several free withdrawals per month.”

In an e-mail, Babyak said that’s not an issue because "The stored-value card is not the only means available to the student to receive their credit balance. They could choose another method."

Elsa Tullos, the district’s spokeswoman, did not provide a comment.

Ken Gotsch, the district’s finance director, said he would review the debit card program in the next month. He wants to find a way to eliminate the fees.